Conducting proper due diligence research is a crucial step for companies before commencing business with a potential partner. Chinese internet giant Alibaba is trying to facilitate the process with the launch of an enterprise credit-rating website that will allow users to gauge potential partners’ creditworthiness with a few clicks.
Dubbed Cheng Xin (诚信, “integrity” or “trust” in English) the site looks at data gleaned from Alibaba’s SME credit system, which the e-commerce titan built with the national Development and Reform Commission last year.
The system consists of credit grade, credit profile, and electronics passport numbers, while the credit score of each company is measured from five aspects: basic information, trading behaviors, financial behaviors, commercial relations, and legal representative. The rating scale falls into five categories from the highest to the lowest–AAA, AA, A, BBB, BB.
Data in Alibaba’s enterprise credit system will be updated monthly.
By searching name of the firm or its legal representative on the newly launched site, users can gain quick access to the credit score of any company in the database. Other relevant information will be also provided, such as the basic information, management, shareholders, investments, and changes in industrial and commercial registrations.
Currently, the system has listed around 100 million enterprises, of which 86 million come from China and 24 million from the U.S. The company said it’s going to add more companies and gradually to include more countries to the system.
Several banks including Huaxia Bank have included Alibaba’s credit data into their risk evaluation system for small-and medium-sized enterprises. SMEs with high credit scores could get no mortgage credit loans at a shorter application cycle.
Alibaba representatives told local media (in Chinese) that this product would facilitate cooperation between companies while lower the fraud risk as well as fundraising costs.
“In international tradings, for example, the lack of credit info about suppliers has increased trading risks, which has inhibited the development of overseas direct sales and distribution,” the Alibaba rep added.
The new service is an example of Alibaba’s endeavors to bring credit transparency to China. Sesame Credit, the company’s credit-scoring for individuals, has become a top credit system in the country after two years of operation.